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India’s Luxury Market May Grow to $15B by 2015

The survey projects India’s luxury market to grow at 25 percent until 2015.
Feb 6, 2013 5:05 AM   By Dilipp S Nag
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RAPAPORT... India’s luxury market is expected to grow  25 percent in 2013 and at that same rate for the next two years, up from the current level of $8 billion and irrespective any global economic slowdown, according to a study by ASSOCHAM-Yes Bank. The country’s luxury market is likely to touch $15 billion by 2015, it noted.

“The luxury market is poised to expand threefold in next three years and the number of millionaires [is] expected to multiply [by] three in another five years,” said D.S. Rawat, the secretary general of ASSOCHAM.

Rawat stated that  consumer spending was likely to rise across the country due  to increasing brand awareness amongst the youth and from greater purchasing power from the upper class in Tier 2 and Tier 3 cities, where luxury cars, bikes and exotic holidays and destination weddings are becoming popular. 

The report said that globally, consumer spending was also on the rise and expected to reach $40 trillion by 2020, with an unprecedented growth of $12 trillion in a decade. In India, consumer spending is expected to grow four times to $3.6 trillion within this period, driven by increasing income and aspirational buying, it added.

The number of ultra-high-net-worth (UHNW) households -- with a minimum net worth of $4.7 million (INR 250 million) -- is expected to triple to 286,000 in next five years in India, while the high-net-worth-individuals (HNIs) will double by 2015 to more than  400,000, the survey stated.

These projections, along with the increasing price parity in luxury products with other international destinations such as Singapore and Hong Kong and customized product offerings, would indicate that the luxury market in India would evolve quickly.

Private Equity Investment to Rise in Luxury Sector

With the expected growth in luxury market, ASSOCHAM stated that the private equity (PE) investments in this sector -- which were less than $1 billion between January 2009 and August 2012 -- would likely increase and support the enhanced size of the Indian luxury market. A number of funds in India, such as Everstone, L Capital and Avigo, are focused on investing in consumer centric businesses, it noted.

“As elite members of the Brazil, Russia, India and China (BRIC) club, which currently accounts for 11 percent of the total world luxury sales, representing a combined retail value of over $33 billion in 2012, India and China are poised to undertake dominant positions in the global luxury market,” ASSOCHAM said.

The survey noted that while China is on track to become the world’s second largest luxury market within the next five years, India is not far behind. With positive regulations and policies for the retail industry being put in place by the government along with a burgeoning middle class, which aspires to own and experience luxury goods and services, India is a market that can no longer be ignored by international brands, it added.

ASSOCHAM said that the best returns would come from investing in luxury assets for the long term and luxury products in the short term. It is estimated that luxury assets will grow to $7.9 billion in 2015 from $4.31 billion currently, with cars showing the highest growth driven by a wider choice of brands, availability in the small and mid segment as well as a rapid increase in millionaires.

Luxury products are projected to rise to $5.38 billion in 2015 from $2.85 billion currently. Jewelry is believed to be the largest contributor, accounting for 31 percent for this sub-sector, driven by Indians' investment mentality regarding jewelry, the survey noted.
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Tags: ASSOCHAM, BRIC, Cars, China, consumer, Dilipp S Nag, FDI, Hong Kong, India, Jewelry, luxury, retail, Singapore, spending, US, YES Bank
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